Philip Morris CR (PM-CR), previously known as Tabak, announced its pretax profit and revenues for the first six month of 2000. Pre-tax profit dropped 22% to CZK 1.73 bil. and revenues fell 19% to CZK 5.23 bil. No other financial figures were released. The figures reported were influenced by the company’s slow sales in Q1/2000. As anticipated, both domestic sales and exports to Slovakia were depressed in Q1 due to substantial retail hoarding at the end of 1999. In the case of Slovakia, retail hoarding was further driven by a January 2000 excise tax increase. The declines in export revenues (excluding Slovakia) reflect the closure of one of the company’s plants (focused on production for exports) in September 1999. The closure of the plant resulted in an extraordinary pretax charge of approximately CZK 800 mil., but only CZK 498 mil. were accounted for in the 1999 financials. We assume that further extraordinary charges (related to the plant closure) were booked during H1 2000.
Separately, PM-CR increased prices by 3% on average as of July 24, 2000. Domestic tobacco consumption is still stagnating and the price increase will boost the company’s sales in the second half of this year.
We remain positive regarding the outlook of PM-CR, and we maintain our long-term accumulate recommendation given the present stock price of CZK 5,700.
(Daniel Martinů)